Cultivating Green Sukuk

With the Green Bond Market expected to reach over USD 250-300bn in 2018, Lee Irvine and Samir Safar-Aly of Simmons & Simmons look at the potential for the growth of a Green Sukuk market in the Middle east.

This article was first published by Emirates Law in December 2018, who have agreed to Simmons & Simmons making it available on elexica.

The first Green Bond was issued in 2007 by the European Investment Bank and since then the market designation of what constitutes a Green Bond has continued to evolve. Typically it involves where the proceeds of a particular issuance are earmarked for investment into environmentally-friendly projects. The European Investment Bank has now issued 135 Green Bonds in 18 currencies, with a value totalling over USD 10.2bn to support such projects.

Historically, it has been international agencies, governments or government-related entities (GREs) who have issued Green Bonds to finance their infrastructure needs. The first sovereign Green Bond was issued by Poland in December 2016 and other nations, such as France, Fiji and Nigeria have also notably made their mark on this industry.

However, more recently, the private sector has started issuing Green Bonds and in 2018, their global issuance is expected to be around USD 250-300bn. As this market has developed, Green Bonds have moved away from being self-certified and the industry has developed various frameworks which provide structured guidelines on the required criteria for a Green Bond.

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